TaxTMI 
TaxTMI 
1988 (7) TMI 70
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....cise duty from the petitioner-company. 3. The respondents, Union of India and the State of Jammu & Kashmir (which was impleaded as party-respondent by an order of the Court dated 21.11.1985) besides controverting the challenge to the applicability of the 1944 Act to the State have also arrived in the counter-affidavit that the petitioners started manufacturing cigarettes after obtaining licence under the Act of 1944 and could not, therefore, after having taken the benefit under the Act be permitted to question its application and that there was no justification for allowing the petitioners to retain the excise duty collected by them from purchasers/consignees of cigarettes. 4. The challenge is based on two contentions : (a) that since entry 84 of the Union List (List I, Schedule VII of the Constitution of India) was not included in the Constitution (Application to Jammu & Kashmir) Order, 1950, it could not be subsequently applied to the State and further that the Constitution (Application to Jammu & Kashmir) Order, 1954 and the Taxation Laws (Application to Jammu & Kashmir) Act, 1954, were invalid and inoperative being violative of the Instrument of Accession which formed the....
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....nt of Accession (supra) thus, specifically provided that its execution, did not affect the continuance of the sovereignty of the Ruler in and over the state except to the extent provided in the Instrument of Accession and by Clause (7) supra complete and unfettered discretion was retained by the Ruler to enter into arrangements with the Government of India under the future Constitution of India. On March 5, 1948, to meet the hopes and aspirations of the people of the State for democratisation of the State, the Ruler, late Maharaja Hari Singh, issued a proclamation appointing a popular interim Government for the State defining its powers, duties and functions pending the formation of a fully democratic Constitution in the Slate. 8. After the interim Government began to function, the Ruler who continued to be the repository of all judicial, legislative and executive functions under the Jammu and Kashmir Constitution Act, 1939, issued, yet another proclamation on June 20,1949 by which he entrusted to Yuvraj Karan Singh "all his functions and powers in regard to the Government of the State whether legislative, executive or judicial including the right and prerogative of making laws,....
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.... Explanation: - For the purposes of this article, the Government of the State means the person for the time being recognised by the President as the Maharaja of Jammu and Kashmir acting on the advice of the Council of Ministers for the time being in office under the Maharaja's proclamation dated the fifth day of March, 1948; (c) the provisions of Article 1 and of this article shall apply in relation to that state; (d) such of the other provisions of this Constitution shall apply in relation to that State subject to such exceptions and modifications as the President may by order specify : Provided that no such order which relates to the matters specified in the Instrument of Accession of the State referred to in paragraph (i) of sub-clause (b) shall be issued except in consultation with the Government of the State : Provided further that no such order which relates to the matters other than those referred to in the last preceding proviso shall be issued except with the concurrence of that Government. (2) If the concurrence of the Government of the State referred to in paragraph (ii) of sub-clause (b) of Clause (i) or in the second proviso to sub-clause (d) of that cla....
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....nce of the State Government. This order after endorsing the relationship of the State with the Union of India as per Delhi Agreement, 1952, also enlarged the powers of the Union Parliament in relation to the State and many provisions of the Constitution of India, not hitherto applicable, were applied to the State. By the Constitution Order of 1954 the jurisdiction of the Union Parliament was extended from the original three subjects of defence, foreign affairs and communications to all subjects on the Union List, subject to some exceptions and modifications. The internal autonomy of the State, however, was not interfered with and consequently matters which concerned the internal administration of the State were left to be incorporated in the State's own Constitution. The Constitution Order of 1954 superseded the Constitution Order of 1950 and defined precisely the scope and extent of the limitations on State's sovereignty consequent upon its accession to India and the incorporation of Article 370 in the Constitution. The Constituent Assembly of the Slate through its resolution dated 15.2.1954 not only recommended but actually sponsored the application of the constitutional provisio....
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....lly growing closer and closer on a democratic basis, without affecting the internal autonomy of the State as stipulated by the Constitution of the State. 11. The Taxation Laws (Extension to Jammu and Kashmir) Act, 1954 (hereinafter called the Taxation Laws Act of 1954) was passed by the Parliament to cover some of the matters enumerated in different entries of the Union List (List I, Seventh Schedule) which were applied to the State by virtue of the Constitution Order of 1954 and the Act of 1944, was one of the several Acts applied to the State of Jammu and Kashmir through the Taxation Laws Act of 1954. 12. After having noticed the brief history of the development of the constitutional relations between the State and the Union of India, I shall now take up for consideration the grounds of challenge raised at the bar. 13. Mr. Bhagotra questioning the validity of the application of the Taxation Laws Act of 1954 and through it the applicability of the Act of 1944, precisely submitted that since the relationship of the State with the Union of India was based on the Instrument of Accession, pursuant to which the Constitution Order of 1950, was issued by the President of India t....
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.................." 14. The Instrument of Accession itself specifically provided that its execution did not affect the continuance of the sovereignty of the Ruler in and over the State except to the extent of the powers surrendered through the Instrument of Accession, vide Clause (4) of the Instrument the power to extend the scope of the Instrument of Accession was also retained by the Ruler and any such extension was to be deemed to be extension of the Instrument of Accession. Thus, the Instrument of Accession itself provided for extending the powers of the Union Parliament and left a complete discretion in the Ruler in that behalf. The execution of the instrument of Accession, did not and could not affect the plenary powers of the Ruler and it was in exercise of those powers that the proclamations were issued by the Rulers on March 5,1948; June 20,1949 and November 25,1949 and anything done through those proclamations had the sanction of the Instrument of Accession itself. As already noticed, Article 370 was incorporated in the Constitution of India to cover the case of Jammu and Kashmir State only. The constitutionality and validity of this article is no longer an open question a....
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....sary in the interest of the Union or the State. By virtue of various Constitution (Application to Jammu and Kashmir) Orders, certain entries from these lists were extended to the State from time to time. According to Clause (1)(c) the only article of the Constitution which applied of their own force to the State were Articles 1 and 370. Clause (1)(d) of Article 370 provided that other provisions of the Constitution of India applicable to the State could be determined by the President of India in consultation with the Government of the State and as held in Sant Singh v. State of J. & K., AIR 1959 J & K 35, the power to modify includes the power to enlarge or add to an existing provision. Therefore, exceptions and modifications could be made in the same manner and the provision could be enlarged too. Clause (2) of Article 370 provided that if the State Government recommended to the President of India an enlargement of the powers of the Union Parliament by including matters other than those included in the Instrument of Accession, it was permissible in the manner provided therein. Thus, in effect, the power to extend the scope of the legislative competence of the Union Parliament had ....
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....8195;  *       *       *        This entry was applied to the State and it is by virtue of the said entry that the Union Parliament acquired the competence to legislate in respect of the matters contained therein. The 1954 Act was enacted by the Parliament, inter alia, to cover matters covered by this entry and, therefore, had the constitutional sanction. It is fallacious to contend that since entry 84 of the Union List, was beyond the scope of the Instrument of Accession, no law could be enacted by the Parliament in respect of the State of Jammu and Kashmir by virtue of that entry. The argument ignores the obvious and shuts its eyes to the provisions of Article 370 of the Constitution. It is equally misconceived to urge that since the Constituent Assembly which was admittedly in session in 1954 did not give its concurrence to the promulgation of the Taxation Laws Act of 1954, that Act had no validity. A similar argument was raised on behalf of the petitioners in S.M.S. Naqashbandi v. Income-tax Officer, AIR 1971 J & K 120, and a Division Bench of this Court re....
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.... passed by the Constituent Assembly itself on 15.2.1954, the Constituent Assembly not only recommended but actually sponsored the application of the constitutional provisions contained in the Order of 1954 and that being the position there was no point in getting it ratified by the Assembly. When the Assembly itself had sponsored the application of the constitutional provisions, there was a sufficient compliance with Article 370(2)." 17. We are in respectful agreement with the view expressed by the Division Bench as early as in 1970, and the observations of the Bench are a complete answer to the challenge raised by learned counsel for the petitioners in this case as well. 18. As a matter of fact, in Naqashbandi's case supra the precise challenge was to the validity, constitutionality and the applicability of the Taxation Laws Act of 1954 in general and of the Indian Income-tax Act to the State of Jammu and Kashmir in particular. The Division Bench held the Taxation Laws Act of 1954 to be constitutionally sound and validly applied to the State. The Bench also held the applicability of the Indian Income-tax Act to the State, which was one of the Acts applied by virtue of the Ta....
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....ion Parliament and the State legislature. Under this article Parliament has exclusive power to make laws for the whole or any part of the territory of India with respect to matters in the Union List. Parliament and the legislature of a State have concurrent powers to make laws with respect to matters enumerated in the Concurrent List, while the legislature of a State has exclusive power to make laws with respect to matters in the State List. However, in its application to Jammu and Kashmir State in Article 246, the words brackets and Figures "Notwithstanding anything in Clauses (2) and (3)" occurring in Clause (1), and Clauses (2), (3) and (4) have been omitted. The net result of these omissions is that the legislative competence of Parliament over the State extends to the matters in the Union List, with certain exceptions. Neither the State List nor the Concurrent List were applied to the State. Vide Section 5 of the Constitution of Jammu and Kashmir, the extent of the legislative powers of the State extend to all matters "except those with respect to which Parliament has power to make laws for the State under the provisions of Constitution of India". Those powers are contained in....
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....s application to the State of Jammu and Kashmir, in Article 372.......... (i) Clause (2) & (3) shall be omitted; (ii) reference to the laws in force in the territory of India shall include reference to hidayats, ailans, ishtihars, circulars, robkars, irshads, yadashts, State Council resolutions, Resolutions of the Constituent Assembly and other Instruments having the force of law in the territory of the State of Jammu and Kashmir; and (iii) reference to the commencement of the Constitution shall be construed as reference to the commencement of the Constitution (Application to Jammu and Kashmir) Order, 1954, i.e., the 14th May, 1954." 21. A bare reference to the aforesaid provisions shows that the purpose of applying Article 372 in a modified form to the State was clearly to avoid the possibility of any conflict between the pre-existing State law and the law enacted by the Parliament on the same field. The State law would be a good and valid piece of legislation only if the field of legislation in respect of that subject matter was not transferred to the Parliament from the State legislation. Clause (1) of Article 372 enacts that all laws in force in the territory of India imm....
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....ision Bench. The Bench observed : "Lastly it was argued that the State Income-tax Act being a valid law within the meaning of Article 372 was saved by Clause (8) of the Instrument of Accession and the Parliament had no jurisdiction to repeal this law. The argument is interesting but on closer scrutiny it appears to be without any substance. It is true that so long as the Parliament did not have the power to legislate on Income-tax matters in the State, the State Act would be a good and valid piece of legislation, but once the field of legislation of income-tax was transferred to the Parliament from the State legislature, then two could not be allowed to continue. In other words, the moment the Parliament passed the Taxation Laws (Extension to Jammu & Kashmir) Act, 1954, it resulted in an automatic repeal of the State Income-tax Act, because the legislative field covered by entry 82 of the Union List having been transferred to the Parliament, the State could no longer exercise any legislative functions over the same. Thus, the State Income-tax Act became dead when the Parliament passed an Act on an identical subject." 23. The above observations are a complete answer to the arg....